Medicaid: Bridging the communication gap

Qualifying for Medicaid is a tricky, detail-oriented process. As attorneys, we are not only faced with the challenge of reaching “magic” numbers, but also with the challenge of emotional families who are witnessing their loved one deteriorate. Each client presents a new situation with a different set of numbers and issues. Clear communication with the client is vital to ensure her full cooperation. Speaking “layman” can be difficult, however, so let’s revisit the basics of how Medicaid divides and evaluates resources and income for married couples, and how this information can be communicated to our clients. As always, these examples are subject to exceptions, exclusions, and the occasional unpredictability of the local Department of Human Services.

Resources are anything that can be converted to cash. Resources include (but are not limited to) real property, automobiles, savings bonds, bank accounts, and the cash value of life insurance. IRAs, 401(k)s, and annuities are also considered resources despite any penalties that may apply to an early withdrawal.

Medicaid looks at all resources owned by the couple, whether titled in the name of the husband or wife individually, the husband and wife together, or the husband and/or wife jointly with another person such as a child. These resources are then further divided between excluded and countable.

The home is considered an excluded resource as long as one spouse is living there (and as long as it is not owned by a trust). One car of any value is excluded. Household furnishings and the client’s personal “stuff” are excluded unless of unusual value. Prepaid funeral and burial contracts are also excluded as long as they are irrevocable.

Countable resources are resources which are not one of the before-mentioned exclusions.

For married long term care Medicaid purposes, resources are valued as of two dates. The first date is colloquially called the “snapshot date,” and is the first day of the month in which the ill (or institutional) spouse first either a) entered a hospital or nursing home or b) transferred from one to the other without a break, and stayed for 30 days. Thus, if the institutional spouse’s first 30-day continuous period of institutionalization started with a hospital entry on Oct. 15 and he was either in hospital or nursing home until at least Nov. 15, his “snapshot date” is October 1 (the first day of the month of the first entry). All countable resources would have to be valued as of Oct. 1. The snapshot date is the determinant for the amount the community (i.e. the non-institutionalized) spouse gets to keep as her Community Spouse Resource Allowance (CSRA). The community spouse keeps half of the countable resources as of the snapshot date, but within a floor and ceiling; the floor is currently $23,184; the ceiling is currently $115,920. In addition, the Medicaid applicant is able to have no more than $2,000. Remember neither one of these figures include those resources that were already deemed excluded.

After the value of the CSRA has been determined, it can be compared to the current countable resources, the excess determined, and the fun begins. A plan needs to be designed and implemented to “spend-down” any excess countable resources. Some common plan elements include, but are not limited to, irrevocable funeral and burial trusts created with the funeral home, spending money on home maintenance, purchasing savings bonds, Medicaid-compliant promissory notes or annuities, and/or transferring assets to a child who meets the disability criteria. Elder law attorneys are familiar with the rules, the allowable transfers, and can develop an appropriate plan.

The second valuation date is the “eligibility date.” If, on the first day of the targeted eligibility month, the couple’s resources are limited to the excluded resources plus the institutional spouse’s $2,000 plus the CSRA, then the institutional spouse is financially eligible for Medicaid (unless a gift precludes eligibility). However, if the resources are not at the qualification levels at dawn of the first day of the month, then the institutional spouse will be unable to qualify for Medicaid until the following month at the earliest, because the couple’s resources are always valued as of the first of the month.

Now that a plan has been devised for the resources, the next client concern and question is, “won’t our monthly income launch us past that $2,000?” The answer is no. Monthly income, such as Social Security, pensions, and such payments, is evaluated on an individual basis and not on the combined income of the couple. The community spouse keeps all of his or her income. The institutional spouse will be allowed to keep a very minimal amount of monthly income – $40 a month for those in a nursing home – as a personal allowance. The rest of the institutional spouse’s income will be used to maintain health insurance and as a co-pay to the facility for his or her care. Furthermore, if the community spouse’s own income does not reach a state-established minimum of $1891.25 per month, then the community spouse will receive an allowance from the Institutional spouse to bring the community spouse’s income up to $1891.25. The community spouse’s monthly income allowance is subject to change and can be increased if the community spouse has high housing expenses (such as a mortgage, insurance, rent, or homeowners fees).

By using these graphic, plain English explanations, the Medicaid process can be explained to elder law clients.